Barton Margoshes, MDChief Medical Officer

CIGNA Group Insurance

1

Health, Absence, & ProductivityTrends and New Perspectives

Atlanta Association of Health UnderwritersMay 13, 2005

2

Demographic Tsunami

Aging Workforce +

Chronic Diseases

Increasing Medical+

Disability Costs

3

Aging Workforce

● In 2010, 51% of labor force will be over 40

US Census Bureau

● In 2003, Americans aged 55 and older made up approximately 12% of the workforce - the highest percentage ever recorded

Bureau of Labor Statistics

● Aging labor force is expected to cause 37% increase in incidence of disability

JHA Factbook 2001

4

Chronic Conditions

● The five illnesses where costs increased the most were heart disease, asthma, mental disorders, cancer and hypertension

Health Affairs 8/04

● “The highest rate of increase in medical and disability claims costs is among 30 to 39 year olds, and both are due to obesity.”

Helen Darling, president of the National Group on Health, a Washington, D.C. consortium of 208 large employers

● 26% of STD episodes involve a chronic illness and represents 52% of employee medical costs

CIGNA Study, 2004

5

Rising Medical Costs

● Factors fueling rising costs include: Rapidly rising hospital unit costs Prescription drug cost increases Increasing consumer demand Aging population

0%

2%

4%

6%

8%

10%

12%

14%

1982 2002$0

$500

$1,000

$1,500

$2,000

2000 2002

Health care as a % of GDP Employee contributions

Source: John Hopkins Bloomberg School of Public Health

Total cost = unit cost x utilization

6

Volume 348(26) 26 June 2003 pp 2635-2645

The Quality of Health Care Delivered To Adults In the United States

McGlynn, Elizabeth A.: Asch, Steven M.: Adams, John: Jeesey, Joan: Hicks, Jennifer:DeCristofaro, Alison: Kerr, Eve A.

BACKGROUNDWe have little systematic information about the extent to which standard processes involved in healthcare—a key element of quality—are delivered in the United States.METHODSWe telephoned a random sample of adults living in 12 metropolitan areas in the United States and…received written consent to copy their medical records…to evaluate performance on 439 indicators of quality of care for 30 acute and chronic conditions as well as preventative care…RESULTSParticipants received 54.9 percent of recommended care. CONCLUSIONSThe deficits we have identified in adherence to recommended processes for basic care pose serious threats to the health of the American public. Strategies to reduce these deficits are warranted.

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Disability Costs

● 33% of employers reported in a National survey that short-term disability incidence rates increased while only 10% reported a decrease in incidence rates

● Employers responding to the survey also cited certain disability conditions as increasing in cost or frequency (ranked from high to low): 

stress or depression (70%);

cancer (60%);

low back pain (57%);

upper extremity repetitive trauma, such as carpal tunnel syndrome (55%);

other musculoskeletal issues (52%); and

respiratory conditions (37%).

2002 Survey of Employers' Time-Off and Disability Programs

by Mercer Human Resource Consulting and Marsh Inc.

8

0

1

2

3

4

5

6

1992 2002

Mil

lio

n

Source: Department of Labor

Individuals Receiving LTD Increased 62% from 1992-2002

9

The Aging Workforce & Lifestyle Health Risks Correlate with Short Term Disability● Risk factors studied:

Age High blood pressure High cholesterol Diabetes

Family history of heart disease Obesity Tobacco use Lack of exercise

$1,389

$1,730

$2,701

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

0-1 Risks 2-3 Risks 4+ Risks

2.45

5.28

13.16

0

2

4

6

8

10

12

14

0-1 Risks 2-3 Risks 4+ Risks

Days

Source: Wayne Burton, M.D., IHPM North American Summit Meeting 2000

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Employer Costs of Lost (% of Payroll)Direct Indirect Total

AON 4-6% 8-12% 12-18%

Towers Perrin 8-12% 4-6% 12-18%

Watson Wyatt 6.1% 2-4x direct costs 12-30%

Mercer 4.4% .5-4x direct costs 7-22%

The Impact of Lost Productivity

● Average $6,000 Per Employee Per Year

● Averages 15% Of Payroll

Direct Premium Costs – Only 1-2% of payroll

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Presenteeism

According to studies at Cornell University 60% of the total cost of worker illness stems from”on-the-job productivity losses” also known as “presenteeism” exceeding what companies spend on medical and disability benefits and sick days. The biggest productivity drains are headaches, allergies, and arthritis.

Research shows the average U.S. employee loses 115 productive hours each year to health conditions, costing employers an estimated $2,000 per worker per year.

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Integrated Health & Productivity Management Model

● Holistic approach to optimize a company’s human capital – investment in an employer’s people

● Addresses presenteeism, lost time, and employee health to lower costs and increase productivity

● Health related systems involved include: Healthcare Incidental absence & FMLA Short and long term disability Behavioral health

Pharmacy Wellness and disease management Workers’ compensation

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Non Health Related Systems involved in a HPM Model

Corporate Culture

Policies and Procedures

Benefit plan designs

Alignment of incentives

Training and human resources

Employee communication

Data Integration

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Integration Rationale

● The ultimate health outcome is return to work and productivity BUT return to work is not a traditional healthcare outcome

● There is inherent fragmentation within the healthcare and disability system

Healthcare controls cost and quality through appropriate medical utilization and medical necessity

Disability management controls cost and quality through matching functional ability and functional demands of the job

● Integration helps employers measure and manage the total cost of benefits

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Integration is not just for large employers

48%

64%

77%

0% 20% 40% 60% 80% 100%

Small (lessthan 500FTE's)

Mid-sized (500to 5,000FTEs)

Large (Morethan 5,000

FTEs)

Interest in Linking Benefits by Employer Size

The Workplace Path to Productivity and Health, Integrated Benefits Institute 2004

16

26%

31%

38%

65%

79%

21%

0% 20% 40% 60% 80% 100%

1

2

3

4

5

6 medical cost savings

employee health

reduce absence

employee sat

productivity

disability savings

Goals of HPM Strategy

The Workplace Path to Productivity and Health, Integrated Benefits Institute 2004

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CIGNA’s Disability & Healthcare Connect

● A comprehensive and integrated approach for controlling quality and cost outcomes of a disability event

● Key components include:

Proactive pre-disability outreach

Coordinated disability and medical case management

Referral to disease management services

EAP assessment and referral

● Common philosophy, linked processes and technology

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Key Study Findings

● Short term disability (STD) durations and return to work percentages are consistently better for claimants having both CIGNA Disability and CIGNA HealthCare

● 20% of employees were responsible for 91% of employee medical costs

● Employees on short term disability represented only 5% of employees, but were responsible for 35% of employee medical costs

● Behavioral health conditions associated with a medically related disability result in poorer outcomes (durations 28% longer; incidence rate 7% greater)

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Key Study Findings (continued)

● Most of the top cost drivers are the same for both disability and medical

● Disability claimants with chronic conditions experience longer durations whether or not the disability was primarily due to the chronic condition

● Employees engaged in WellAware’s (disease management) Cardiovascular Disease and Low Back Pain programs experience shorter disability durations & lower incidence of short term disability

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12%Shorter STD

Durations

6%Higher Return to

Work Rates

0%

5%

10%

15%

20%

Solutions that Address Both Medical and Disability Cost Drivers Have a Greater Impact

Proven Results

Claimants with both a CIGNA STD and a CIGNA HealthCare claim have:

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Average Medical & Disability Costs for Employees

22

Disease Management Reduces Both Medical and Disability Costs

ConditionAdmission Rate

ReductionMedical Cost

Savings

DisabilityIncidence Rate

Reduction

DisabilityDuration

Reduction

Cardiac 4.0% 13.0% 3.0% 7.7%

Low Back 2.2% 12.0% 1.0% 18.0%

Disease Management

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Disease Management Reduces Costs

Average Medical & Disability Costs for Employees

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Summary● Healthcare and disability costs will continue to escalate due to

demographic trends

● Aging, chronic diseases, and mental health are inter-related and will have an adverse effect on employers profitability and competitive advantage

● Employers need to consider the total cost of care (healthcare + disability + lost productivity)

● Investing in an employer’s human capital through wellness, disease management, quality healthcare, and integrated disability makes business sense

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Questions